Manufacturing News

R&D tax incentive capped at $100 million

Changes to the research and development incentive have been passed in the Senate, in a move to improve the budget.

The Bill introduces a cap of $100 million on the amount of research and development expenditure that companies can claim as a tax offset under the research and development incentive.

For expenditure above $100 million, companies will be able to claim a tax offset at the company tax rate.

Fewer than 25 companies are expected to be affected by the new measure. The vast majority of companies claiming the research and development tax incentive will be unaffected.

The amendment will take effect from income years beginning on or after 1 July 2014, one year later than previously announced by the former government. This start date recognises the uncertainty facing companies following the considerable delay in legislating the original measure announced by the former government in February 2013.

The impact on the Budget from the delayed start date is a reduction in revenue of $300 million over the forward estimates.

The Australian Industry Group (Ai Group) has said the changes are “harmful to Australia’s long-term prosperity.”

In a statement, Australian Industry Group chief executive Innes Willox said “Businesses will spend less on their own R&D and they will make less of a contribution to Australia’s research infrastructure and research networks.

“We should be encouraging innovation. Instead the Parliament is considering measures that would reduce domestic spending on R&D.

“The measure is all the more perplexing because the biggest direct impacts will be felt by organisations undertaking applied and commercial R&D. In contrast, other current policy directions are focused on lifting commercial-related R&D.

“The proposals will add substantially to the complexity of Australia’s R&D Tax Incentive. To add insult to injury, the proposals may have retrospective effect. If enacted they would certainly cut into existing, often collaborative R&D programs,” Willox said.

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